DoT-defence ministry row may hit 3G rollout

Fresh trouble seems to be brewing between the defence ministry and the Department of Telecommunications over spectrum and this could  put a question mark on the launch of third generation telephony services in the country by March next year.

The defence ministry was supposed to vacate the spectrum, or airwaves being used by the three armed forces, by July or August. The government was hoping to hand over the ownership of this spectrum to the winners of the just-concluded auction for 3G by September 1. Telecom firms would then have used these radiowaves for 3G rollout, that promises high-speed data connectivity.

But the defence ministry now says DoT has gone back on the commitments it made in a memorandum of understanding signed between the two in May last year over spectrum.

The bone of contention is a DoT directive asking the defence ministry to pay for the spectrum it is holding or face withdrawal of assignment by the end of next month.

The defence ministry has rejected this demand. It says the MoU had clearly mentioned that the defence forces would not be charged any fees for the usage of spectrum. In its argument, the ministry has said it earns no revenue from spectrum and uses the airwaves only for the country's security. The waiver of spectrum fee was also recommended by the Steering Group on Spectrum Pricing in its report in 2007, the defence ministry has said.

The communication asking for payment was sent by DoT's Wireless Planning Cell, which administers spectrum used by various departments of the government. WPC has also said that pending payment, it will not clear any request for fresh assignment of spectrum and the operating licences that are needed by the defence forces for operating the communication systems.

As the issue has wider financial implications for the government, the finance ministry has taken it up with DoT. It has asked DoT to provide all the details of the proposed waiver to the ministry.

It may be noted here that the finance ministry was hoping to prune the country's fiscal defict with the help of the Rs 67,719-crore revenue it earned at the 3G auction.

A delay in resolving the issue could also hurt the thee big telecom players --Bharti Airtel, Vodafone Essar and Reliance Communications -- which won the spectrum for key metros of Delhi and Mumbai. Analysts say any delay in rolling out 3G could affect the viability of their operations. Telecom firms together are expected to raise Rs 50,000 crore in debt to fund the 3G roll out.

The defence ministry and DoT are committed to some deadlines on the release of spectrum for 25 MHz of 3G spectrum. This is based on, among other things, the progress of the alternative optical fibre cable communications network, which the defence forces will use after they vacate spectrum.

The armed forces have already vacated 10 MHz, and are expected to give out more spectrum to DoT in July and August when orders for equipment would be given out and again when work on the cable begins.The remaining 5 Mhz is expected to be released in 2013, when the optic fibre cable network, being built by BSNL, is ready.

The defence ministry and DoT have been at loggerheads for over an year on various issues regarding the vacation of spectrum. DoT has openly complained that the delay in 3G auctions had been primarily because of defence's reluctance to vacate the scarce spectrum. The defence ministry has denied these charges saying it could not release spectrum before an alternative communication network is in place.